EUR/USD Forecast: Euro defines key levels for the next breakout

EUR/USD has turned south after having failed to clear the parity level during the American trading hours on Thursday. The pair stays in a consolidation phase as investors await FOMC Chairman Jerome Powell's speech at the Jackson Hole Symposium.

On Thursday, Philadelphia Fed President Patrick Harker said that he wants to see the next inflation reading before deciding on the September rate decision but added that a 50 basis points (bps) rate hike would still be a "substantial move." Although the dollar lost strength against its major rivals after these comments, the cautious market mood allowed the currency to stay resilient.

Jackson Hole Symposium Preview: Will Powell power dollar bulls?

According to the CME Group FedWatch Tool, markets are pricing in a 62.5% probability of a 75 bps rate increase in September. In case Powell's remarks suggest that the Fed is leaning toward another oversized hike next month, the dollar could continue to gather strength. On the other hand, the greenback could have a tough time finding demand if Powell acknowledges softening inflation pressures and reiterated that they will look at the August inflation and employment data before deciding on the size of the next rate move.

The US Bureau of Economic Analysis will release the Personal Consumption Expenditures (PCE) Price Index data for July alongside the Personal Income and Personal Spending figures. Since these data will be released ahead of Powell's speech, the market reaction could remain muted. Nevertheless, a softer-than-forecast PCE could trigger a short-lasting dollar selloff and vice versa.

EUR/USD Technical Analysis

EUR/USD continues to fluctuate between key technical levels for the third straight day on Friday. The Relative Strength Index (RSI) indicator on the four-hour chart moves sideways near 50, reflecting the pair's indecisiveness.

On the upside, 1.0000 (psychological level, static level) aligns as key hurdle. Above that level, 1.0020 (Fibonacci 23.6% retracement of the latest downtrend) could act as interim resistance before 1.0040 (50-period SMA) and 1.0080 (Fibonacci 38.2% retracement).

Immediate support is located at 0.9960 (20-period SMA). If that level is confirmed as resistance, additional losses toward 0.9920 (end-point of the downtrend) and 0.9900 (psychological level, multi-year lows) could be witnessed.